Paylocity’s first quarter results for 2025 surpassed Wall Street’s expectations on both top-line and profitability, yet the market response was negative. Management credited the quarter’s outperformance to robust recurring revenue growth, effective execution in its broker channel, and successful integration of recent acquisitions. CEO Toby Williams pointed to strong demand for its expanded product suite and highlighted sales momentum during the company’s busiest season. However, leadership also acknowledged the early signs of buyer caution, attributing this to a more uncertain macroeconomic environment that is beginning to influence customer decision cycles.
Is now the time to buy PCTY? Find out in our full research report (it’s free).
Paylocity (PCTY) Q1 CY2025 Highlights:
- Revenue: $454.5 million vs analyst estimates of $441.9 million (13.3% year-on-year growth, 2.9% beat)
- Adjusted EPS: $2.43 vs analyst estimates of $2.12 (14.8% beat)
- Adjusted Operating Income: $172.7 million vs analyst estimates of $148.7 million (38% margin, 16.2% beat)
- Revenue Guidance for Q2 CY2025 is $388 million at the midpoint, above analyst estimates of $382.1 million
- EBITDA guidance for the full year is $573 million at the midpoint, above analyst estimates of $547.2 million
- Operating Margin: 27.9%, up from 26.5% in the same quarter last year
- Market Capitalization: $9.69 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Paylocity’s Q1 Earnings Call
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Scott Berg (Needham & Company) questioned the shift away from per-employee pricing for new CFO-focused modules. CEO Steve Beauchamp explained that pricing will align with buyer expectations for each product line, leveraging a mix of user-based and transactional models when appropriate.
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Brad Reback (Stifel) asked about macro trends influencing buyer behavior. CEO Toby Williams acknowledged stability overall but noted the early emergence of caution in some deal cycles, particularly reflecting a “pause” among certain customers.
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Brian Peterson (Raymond James) probed the drivers behind margin expansion and its sustainability. CFO Ryan Glenn cited operational leverage from productivity gains and stated that while recent margin growth is notable, future expansion will likely be more moderate.
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Daniel Jester (BMO Capital Markets) inquired about customer engagement with AI features. Beauchamp stated that adoption rates are increasing, especially for embedded use cases like policy inquiries and compliance support, and expects broader uptake as new features roll out.
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Jared Levine (TD Cowen) sought clarity on gross margin drivers and the impact of Airbase’s transaction-fee model. Glenn pointed to economies of scale and efficiency, adding that Airbase’s software-heavy revenue mix has not seen material macro impact so far.
Catalysts in Upcoming Quarters
In future quarters, our analysts will be tracking (1) the pace of Airbase integration and cross-sell success within Paylocity’s client base, (2) continued adoption and utilization of AI-driven features across the HCM platform, and (3) the resilience of broker channel referrals amid broader industry consolidation. Execution in expanding average revenue per client and managing macroeconomic headwinds will also be closely watched.
Paylocity currently trades at $175.50, down from $194.32 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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